Can selling name avert fiscal cliff at Cobo?

Despite a 50 percent increase in the number of events since 2012, the riverfront convention center still faces obstacles in attracting conventions and major events.

The Detroit Regional Convention Facility Authority board's decision to begin exploring a sale of the naming rights to Cobo Center came after managers believed they had exhausted most options for wringing out inefficiencies and boosting revenues.

Despite a 50 percent increase in the number of events since 2012, the riverfront convention center still faces obstacles in attracting conventions and major events that require more than the 3,500 hotel rooms available downtown, said Claude Molinari, general manager of Cobo Center.

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Claude Molinari

Annual revenue for Cobo Center is expected to top $25 million this year from exhibition hall rentals, special events and parking for both events and daily users.

But baked into that overall revenue figure is a $6 million state subsidy from taxes on hotels, liquor and cigarettes that will drop to $5 million in the fiscal year that begins Oct. 1 and disappear completely in 2023.

The Legislature's mandate that Cobo Center operate free of taxpayer support has added pressure on convention authority officials to turn to different sources of revenue.

"We've been given a mission by the Legislature … to get this facility to break even. So we cannot keep any stone unturned," said Patrick Bero, CEO and CFO of the Detroit Regional Convention Facility Authority. "… They didn't want it to be an endless blank check."

The last untapped option is selling the name of the 57-year-old facility, which underwent a $279 million renovation from 2010 to 2015 that is credited with attracting more convention business in recent years.

"We always knew that at some point we were going to have to test the market and see if it would be possible to sell the naming rights and what that would garner us," Bero told Crain's.

The convention authority signed a contract on Aug. 17 with The Fulkerson Group in Birmingham and Austin, Texas-based Connect Partnership Group to market the naming rights for Cobo Center in a process that could take between six months and two years, Bero said.

The Fulkerson Group and Connect Partners Group have formed a joint company, FulkersonConnect LLC, to work on the renaming project together.

The Fulkerson Group markets and sells sponsorships for major events in Detroit, including the Cobo Center's marquee event, the North American International Auto Show; the Ford Fireworks; the Thanksgiving Day parade; and the Chevrolet Detroit Belle Isle Grand Prix.

Connect Partnership Group is "very seasoned" in selling naming rights to sports stadiums and amphitheaters, said Tavi Fulkerson, president and owner of The Fulkerson Group.

"With the renaissance of Detroit and the incredible and impressive renovation of Cobo Center, there certainly should be some opportunity," Fulkerson told Crain's. "There's not a great deal of major branding positions left."

Cobo officials think they could sell the building's name for $500,000 a year, based on what Huntington Bank paid for the naming rights to Cleveland's convention center.

But they won't know how valuable the facility's brand is until they test the waters, Bero said.

"I'd love to sit here and tell you there are people banging down our door waiting to throw a pot of money at us, but that would be way premature," Bero told Crain's.

The five-member convention authority board made the decision to start considering a sale of the naming rights after years of renovations of Cobo and a revamping of the convention center's operations have helped reduce annual multimillion-dollar deficits to $288,000 last fiscal year.

"We have a legislative mandate that we have to operate with a balanced budget," said Larry Alexander, chairman of the convention authority board. "We're coming close, but we're not there yet."

Through July, Cobo Center's revenue was running $49,000 behind from a year ago, Bero said.

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Cobo Center

Cobo officials think they could sell the building's name for $500,000 a year, based on what Huntington Bank paid for the naming rights to Cleveland's convention center two years ago.

Cobo Center's $14.8 million base revenue — excluding parking and the state subsidy — includes about $350,000 from commercial advertising on a digital billboard at the corner of West Congress Street and Washington Boulevard, Molinari said.

The eye-catching 4,800-square-foot digital billboard on the front of the building cannot legally be used for commercial advertising because it faces Woodward Avenue at the Jefferson Avenue intersection. A designated national scenic byway, there can't be billboards facing Woodward Avenue that exceed 1,200 square feet.

"It's disappointing to us, because we would certainly be able to increase the revenue from advertising if we were able to use that board for (commercial ads)," Molinari said. "The westbound Lodge (freeway traffic) would be a fantastic use of that."

The renaming of Cobo Center also has garnered political support from Mayor Mike Duggan because the convention hall is named for former Mayor Albert Cobo, whose tenure as mayor in the 1950s is marked by a racially-charged agenda to restrict where African Americans could live in the city.

Alexander said the convention authority board members are focused on the bottom line, not the debate around Mayor Cobo's legacy of carrying out the demolitions of African American neighborhoods and businesses for so-called urban renewal.

"We were looking at it strictly from the financial benefit," said Alexander said. "If we can resolve (the Albert Cobo) issue and still reap the financial obligations that we have, so be it."